Wiles et al.v.Suydam

Court of Appeals of the State of New YorkFeb 8, 1876
64 N.Y. 173 (N.Y. 1876)

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Summaries written by judges

  • In Wiles v. Suydam (64 N.Y. 173, 179) a complaint set forth a cause of action against a defendant because of a failure to make and record the certificate required by the act relating to manufacturing corporations and also a cause of action seeking to charge him as trustee with the debt because of failure to file an annual report.

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  • In Wiles v. Suydam (64 N.Y. 173) the complaint, in a single count, charged the defendant with liability for a debt of a corporation of which he was both a stockholder and trustee, first, because no certificate of full payment of the stock had been filed; second, because no annual report of debts and liabilities had been made. It was held that there were two causes of action charged which under the Code could not be properly joined in the same action.

    Summary of this case from Tew v. Wolfsohn

3 Summaries

Argued January 28, 1876

Decided February 8, 1876

A.H. Hitchcock for the appellant. Geo. W. Weiant for the respondents.

The ground of demurrer relied upon is that several causes of action are improperly united. The complaint contains but one count composed of a series of allegations, and was doubtless framed upon the theory that there is but one cause of action contained. If, however, the complaint does contain several causes of action, and they are improperly united, the omission to state the causes of action in separate counts properly numbered does not deprive the defendant of the right to demur. ( Goldberg v. Utley, 60 N.Y., 427.) The complaint alleges an indebtedness against the Imperishable Stone Block Pavement Company of New York city, which had been prosecuted to judgment and execution; that the defendant was a "stockholder to the amount of $50,000," but had not paid for the same, and that no certificate had been made and recorded that the capital was paid in. Section 10 of the act authorizing the formation of corporations for manufacturing and other purposes declares that until such certificate is recorded the stockholders shall be liable for the debts of the company to the amount of their stock respectively. The complaint also alleges that at the time the debt was contracted and ever since, the defendant was a trustee of the corporation, and that no report was filed on the 1st day of January, 1873, nor at any time since, and for this neglect the twelfth section of the act aforesaid declares that the trustees shall be liable for all the debts of the corporation then existing, or which may be thereafter created, until such report is filed.

It is insisted by the counsel for the plaintiff that this constitutes but one cause of action, and he argues that the cause of action is to recover the debt upon two grounds of personal liability created by statute. I am unable to concur in this view. The recovery of the debt is the object of the action, but a cause of action must have two factors, the right of the plaintiff and the wrong or obligation of the defendant. These must concur to give a cause of action. The cause of action against the defendant as a stockholder, consists of the debt and the liability created by statute against stockholders when the stock has not been paid in and a certificate of that fact recorded. In effect the statute in such a case withdraws the protection of the corporation from the stockholders, and regards them liable to the extent of the amount of their stock as copartners. ( Corning v. McCullough, 1 N.Y., 47.) The allegations in the complaint are sufficient to establish a perfect cause of action against the defendant as a stockholder primarily liable for the debts to the amount of his stock. The allegations against the defendant as trustee also constitute a distinct and perfect cause of action, but of an entirely different character. Here the liability is created by statute and is in the nature of a penalty imposed for neglect of duty in not filing a report showing the situation of the company. The object of the action is the same, viz., the collection of the debt; but the liability and the grounds of it are entirely distinct and unlike. That there are two causes of action in this complaint seems too clear to require much argument. The more difficult question is, whether they may be united in the same complaint. The first cause of action against the defendant as a stockholder is an action on contract. The six years' statute of limitations applies. (1 N.Y., supra.) The defendant is entitled to contribution. (3 Hill, 188.) But in respect to the action against defendant as trustee, this court held in Merchants' Bank v. Bliss ( 35 N.Y., 412), that the three years' statute of limitations applied under the following provision of the Code: "An action upon a statute for a penalty or forfeiture when the action is given to the party aggrieved." (§ 92.)

With this decision before us, which we do not feel at liberty to overrule, this cause of action must be regarded as an action upon a statute for a penalty or forfeiture. The liability is far more extensive than that of stockholder, it is for all debts, while the former is limited to the amount of the stock. The defendant would not be entitled to contribution except by statute (Laws of 1871, p. 1435), and contributions would be from different persons than in the other case. It is claimed also that execution against the person might issue and this would seem to follow from the decision in 12 New York ( supra), but we do not deem it necessary to pass upon that question. If these actions may be united it must be by virtue of the first subdivision of section 167 of the Code. From the nature of the two actions they do not come under either of the other subdivisions. The first subdivision reads as follows: "The plaintiff may unite in the same complaint several causes of action whether they be such as have been heretofore denominated legal or equitable, or both, when they all arise out of: 1st. The same transaction or transactions connected with the same subject of action." This language is very general and very indefinite. I have examined the various authorities upon this clause, and I am satisfied that it is impracticable to lay down a general rule which will serve as an accurate guide for future cases. It is safer for courts to pass upon the question as each case is presented. To invent a rule for determining what the "same transaction" means, and when a cause of action shall be deemed to "arise out" of it, and what the "same subject of action" means, and when transactions are to be deemed connected with it, has taxed the ingenuity of many learned judges, and I do not deem it necessary to make the effort to find a solution to these questions. An interesting chapter on this clause is contained in a recent work by John N. Pomeroy, on "Remedies and Remedial Rights" (p. 496), which contains a review of all the authorities, and a critical analysis of the language with definitions and suggestions which will be useful in determining particular cases. Judge COMSTOCK says of this clause: "Its language is I think well chosen for the purpose intended, because it is so obscure and so general as to justify the interpretation which shall be found most convenient and best calculated to promote the ends of justice." ( 17 N.Y., 592.) There is certainly ample scope for construction, but it is sometimes difficult to determine what interpretation will best promote the ends of justice. It is probable that the primary purpose of this provision was intended to apply to equitable actions, which frequently embrace many complicated acts and transactions relating to the subject-matter of the action, which it would be desirable to settle in a single controversy. The clause was not intended to overturn all distinctions in actions and rules of pleadings, and this court has held that an action of trespass, in breaking into a house and opening a trunk, could not be joined with an action on a covenant in a lease for quiet enjoyment, although the act which rendered the defendant liable in both actions was the same. ( 56 N.Y., 332.) In this case it is attempted to unite an action on a statute for a penalty with an action on contract. The nature of the two actions are essentially different, although the object to be attained is the same. The facts to establish the liability are entirely unlike. The measure of liability is different; the defenses are different. The rights of the defendant may be seriously prejudiced. Suppose a general verdict is obtained, from whom would the defendant seek contribution, from his co-trustees or from his co-stockholders? Can it be said that these causes of action arose out of the same transaction? If so, what was the transaction? Was it the formation of the company? That created no liability nor cause of action. Was it the debt of the plaintiff? That created no liability against the trustees, nor does such liability arise out of it. Was it the failure to file a certificate that the stock was not paid in? If so, there is no connection between that and the transaction which created the liability against the defendant as trustee. An omission to record a certificate that the stock was paid is not, in any sense, the same transaction as the neglect of trustees to file a report of the financial condition of the company. Without attempting to define the terms of the last clause, I do not think that there is any such connection between the transactions, out of which the causes of action arose in this case, and the "subject of action" as to justify uniting the two causes of action.

The causes of action are independent of each other; the "transactions" are different, and there is no legal affinity between them. The language of the last clause is more applicable to equitable actions where the controversy is in respect to specific property, real or personal. It is difficult to define in this case the "subject of action." The object of the action is to recover the debt; but is the debt the subject of action? In some sense it, perhaps, may be so regarded, while in another the subject of action may be regarded the penalty or forfeiture. If the former, there is no natural connection between it and the transaction creating the liability. If the latter, it has no connection with the transaction against defendant as a stockholder. The language of the last clause, it seems to me, has no application to this case, and I am confident it was never intended by it to force a connection between such distinct and independent things. It may be convenient for the plaintiff to combine the two causes of action, but, looking at the rights of both parties and the rules of law, we cannot think that the Code was designed to authorize their union in one complaint.

The judgment must be reversed, and the demurrer sustained, with leave to the plaintiff to amend within the usual time.

All concur.

Judgment accordingly.